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may pay the shortfall with Form CT-1 even if the amount is

is made by not including that employee or that employee’s

$2,500 or more.

compensation on lines 1c through 1d and line 7c.

•

Semiweekly schedule depositor. Deposit the shortfall

For more information about the employer’s Tier I tax

by the earlier of the first Wednesday or Friday that comes on

exemption, visit IRS.gov and enter the keywords “HIRE Act”

or after the 15th of the month following the month in which

in the search box.

the shortfall occurred or the due date of Form CT-1. For

1c. Enter on line 1c the number of qualified employees paid

example, if a semiweekly schedule depositor has a deposit

exempt compensation (including sick pay) after March 31.

shortfall during January 2011, the shortfall makeup date is

A qualified employee is an employee who:

February 16, 2011 (Wednesday).

•

Begins employment with you after February 3, 2010, and

before January 1, 2011;

Penalties and Interest

•

Certifies by signed affidavit (Form W-11, Hiring Incentives

to Restore Employment (HIRE) Act Employee Affidavit, or

The law provides penalties for failure to file a return, late

similar statement under penalties of perjury), that he or she

filing of a return, late payment of taxes, failure to make

has not been employed for more than 40 hours during the

deposits, or late deposits unless reasonable cause is

60-day period (including 2009) ending on the date the

shown. Interest is charged on taxes paid late at the rate set

employee begins employment with you;

by law. For more information, see Pub. 15 (Circular E).

•

Is not employed by you to replace another employee

Order in which deposits are applied. Generally, tax

unless the other employee separated from employment

deposits are applied first to the most recent tax liability

voluntarily or was terminated for cause; and

within the specified tax period to which the deposit relates. If

•

Is not related to you. An employee is related to you if he

you receive a failure to deposit penalty notice, you may

or she is your child or a descendant of your child, your

designate how your payment is to be applied in order to

sibling or stepsibling, your parent or ancestor of your parent,

minimize the amount of the penalty. You must respond

your stepparent, your niece or nephew, your aunt or uncle,

within 90 days of the date of the notice. Follow the

or your in-law. An employee is also related to you if he or

instructions on the notice you received. See Rev. Proc.

she is related to anyone who owns more than 50% of your

2001-58 for more information. You can find Rev. Proc.

outstanding stock or capital and profits interest or is your

2001-58 on page 579 of Internal Revenue Bulletin 2001-50

dependent or a dependent of anyone who owns more than

50% of your outstanding stock or capital and profits interest.

Exempt compensation is the compensation paid that

Trust fund recovery penalty. If taxes that must be

requires Tier I tax withholding.

withheld are not withheld or are not deposited or paid to the

United States Treasury, the trust fund recovery penalty may

1d. Enter the tax-exempt compensation (other than tips

apply. The penalty is 100% of the unpaid taxes. This penalty

and sick pay) paid to qualified employees after March 31,

may apply to you if these unpaid taxes cannot be

2010. Multiply by 6.2% and enter the result on line 1e.

immediately collected from the employer or business. The

1f. Subtract line 1e from 1b and enter the result on line 1f.

trust fund recovery penalty may be imposed on all persons

Line 2—Tier I Employer Medicare Tax

who are determined by the IRS to be responsible for

collecting, accounting for, and paying over these taxes, and

Enter the compensation (other than tips and sick pay)

who acted willfully in not doing so. For more information, see

subject to Tier I employer Medicare tax in the Compensation

Pub. 15 (Circular E).

column. Multiply by 1.45% and enter the result in the

Tax column.

Specific Instructions

Line 3—Tier II Employer Tax

Enter the compensation (other than tips) subject to Tier II

Final return. If you stop paying taxable compensation and

employer tax in the Compensation column. Do not enter

will not have to file Form CT-1 in the future, you must file a

more than $79,200 per employee. Multiply by 12.1% and

final return and check the Final return box at the top of Form

enter the result in the Tax column.

CT-1 under “2010.”

Line 4—Tier I Employee Tax

Processing of your return may be delayed if you do

not provide the required amounts in the

Enter the compensation, including tips reported, subject to

Compensation and Tax columns.

CAUTION

Tier I employee tax in the Compensation column. Do not

enter more than $106,800 per employee. Multiply by 6.2%

Line 1a Through 1f—Tier I Employer

and enter the result in the Tax column.

Tax

Stop collecting the 6.2% Tier I employee tax when the

employee’s wages and tips reach the maximum for the year

1a. Enter the compensation (other than tips and sick pay)

($106,800 for 2010). However, your liability for Tier I

subject to Tier I employer tax for all employees in the

employer tax on compensation continues until the

Compensation column. Do not enter more than $106,800

compensation, not including tips, totals $106,800 for the

per employee. Multiply by 6.2% and enter the result on line

year.

1b.

Line 5—Tier I Employee Medicare Tax

Complete lines 1c through 1e to figure the payroll tax

exemption for the employer’s share (6.2%) of Tier I

Enter the compensation, including tips reported, subject to

employer tax on compensation (other than tips and sick pay)

Tier I employee Medicare tax in the Compensation column.

to one or more qualified employees. An employer must be a

Multiply by 1.45% and enter the result in the Tax column.

qualified employer to be eligible for the employer’s Tier I tax

For information on reporting tips, see Tips on page 3.

exemption. A qualified employer is any employer other

Line 6—Tier II Employee Tax

than Federal, State, and any related government entities.

An employer may elect not to apply the Tier I tax

Enter the compensation, including tips reported, subject to

exemption with respect to a qualified employee. The election

Tier II employee tax in the Compensation column. Only the

-5-

Instructions for Form CT-1 (2010)

Instructions For Form Ct-1 - Employer'S Annual Railroad Retirement Tax Return - 2010 Page 5

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